Research and development tax credits are a tax relief designed to encourage greater R&D spending and investment in innovation. They work by either reducing your company’s liability to corporation tax or giving you a cash payment.
There are two schemes for claiming relief: Small or Medium-sized Enterprise (SME) and Research and Development Expenditure Credits (RDEC). R&D will qualify under either scheme if you attempt to overcome scientific or technological uncertainties at your own risk.
Easy R&D focus on the SME scheme where up to 33% of the qualifying R&D costs can be set against corporation tax. You can backdate claims up to two years from the end of your accounting period. Our service offers technical and specialist tax expertise to maximise R&D tax relief claims.
5 Easy Steps to claim R&D tax relief
Our 5 Easy Steps claim process combines meeting a Easy R&D Consultant with online convenience. We guide you through the information needed for your claim. You can provide this online in your own time and at your own pace.
A R&D Consultants will visit you to discuss qualifying criteria for your R&D tax relief – namely company, activity, project and costs.
Company
Your company will be counted as a HMRC SME if it has fewer than 500 staff. Additionally your firm’s turnover needs to be less than €100 million and have gross assets of less than €86 million. Fortuitously this is double the more widely used European Union SME standard definition.
Is your company part of a group? If so, you’ll need to check the SME limits are not exceeded. HMRC treat all companies worldwide in a group as a single economic entity.
Activity
Your R&D will qualify if you try and overcome scientific or technological uncertainties, through creating new or significantly enhanced products, services, software or processes. You can also count R&D where you copy and improve a competitor’s product. However detailed information concerning your R&D cannot already be publicly available or deducible by a competent professional in the field.
Project
Make your project identifiable with a clear objective and a start and end date. If the project spans multiple accounting periods then qualifying costs in each period will be set against the corresponding corporation tax via a HMRC CT600. Your R&D project also needs to be at your own risk (you pay) and it doesn’t matter if the project succeeds or fails.
Costs
Your R&D costs are important to justify and maximise within your qualifying R&D project. They determine the size of your corporation tax relief. The key qualifying costs are summarised below:
- Staff Costs – Apportion your employee costs (salary, national insurance and employer pension) for their time spent on the R&D project. You can also count reimbursed R&D business expenses.
- Software – Include any software purchased for R&D purposes. Apportioned costs if there is any subsequent use.
- Subcontracted R&D – Claim 65% of what you paid your R&D subcontractor.
- Utilities & Consumables – Add up water, fuel, power and material used in the project.
- Prototypes – Include all R&D prototypes
How much can I claim?
Add up your eligible costs and if this is your first claim you’ll have the opportunity to cover the last 2 accounting periods. Your claim will be worth between 14.5% – 33% of these total R&D costs assuming all the criteria for R&D tax relief have been met. The Easy R&D average claim size is around £50,000 with over 600 claims and 100% success rate.